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Xu v. Donovan

Superior Court of Massachusetts, Suffolk, Business Litigation Session

June 2, 2017

Edward Xu PPA Li Chen et al.
Paul Donovan et al No. 137197


          Kenneth W. Salinger, Justice of the Superior Court.

         This dispute relates to a high/low agreement in a prior medical malpractice case. Plaintiffs had sued two doctors and a nurse who worked at Tufts Medical Center (" Tufts"). The parties to that prior action and Tufts agreed prior to the jury verdict that Plaintiffs would receive a maximum of $2.5 million for each defendant found to be liable and be paid $300, 000 for each defendant found not to be liable. The jury found that the two physicians were liable for negligence and that the nurse was not. It award $24.43 million as damages against the doctors. In accord with the high/low agreement, Plaintiffs recovered only $5.3 million.

         Plaintiffs claim they were fraudulently induced to enter into the high/low agreement by representations that the available insurance was capped at $2.5 million per defendant, and that in reality there was an excess insurance policy that provided up to $30 million in coverage with no cap per defendant. They seek damages from the parent of the medical center (Tufts Medical Center Parent, Inc., or TMCP), the captive insurer that issued the primary and excess insurance policies (Tufts Medical Center Indemnity Co., Ltd., or TMCIC), and Paul Donovan, who is a Senior Claims Administrator for Tufts and signed the high/low agreement on its behalf.

         TMCP and TMCIC assert a counterclaim seeking a declaratory judgment stating that the total insurance coverage available for the claims in the underlying malpractice case, including both the primary and excess insurance policies, was capped at $2.5 million per person per claim or medical incident. TMCP, TMCIC, and Donovan move for summary judgment on all claims and counterclaims.

         The Court concludes that TMCP, TMCIC, and Donovan are entitled to summary judgment in their favor. The excess and primary insurance policies unambiguously provide that the maximum coverage for the doctors and nurse sued in the prior action was $2.5 million per individual defendant. TMCP and TMCIC are entitled to a declaratory judgment to that effect. And Plaintiffs' claims against all Defendants for fraud and for committing unfair and deceptive practices in violation of G.L.c. 93A, and its separate claim against Donovan only for negligence, all fail as a matter of law.

         1. Parsing the Insurance Policies

         1.1. Reading Unambiguous Policy Language

         " [C]onstruing the language of an insurance contract is a question of law for the trial judge, " and therefore is appropriate for resolution on a motion for summary judgment. Thattil v Dominican Sisters of Charity of the Presentation of the Blessed Virgin, Inc., 415 Mass. 381, 385 n.6, 613 N.E.2d 908 (1993), quoting Cody v. Connecticut Gen. Life Ins. Co., 387 Mass. 142, 146, 439 N.E.2d 234 (1982). " Like all contracts, if the language of an insurance policy is unambiguous, " then a court must " construe the words 'in their usual and ordinary sense.'" Boazova v. Safety Ins. Co., 462 Mass. 346, 350, 968 N.E.2d 385 (2012), quoting Hakim v. Massachusetts Insurers' Insolvency Fund, 424 Mass. 275, 280, 675 N.E.2d 1161 (1997).

         The Court is persuaded that there is only one correct way to read Tufts' primary and excess insurance policies with respect to per person professional liability coverage limits, and that the policies are therefore unambiguous with respect to that issue. See Surabian Realty Co. v. NGM Ins. Co., 462 Mass. 715, 718, 971 N.E.2d 268 (2012) (court " may conclude that language [in an insurance policy] is ambiguous only 'where the phraseology can support a reasonable difference of opinion as to the meaning of the words employed and the obligations undertaken'") (quoting Bank v. Thermo Elemental, Inc., 451 Mass. 638, 648, 888 N.E.2d 897 (2008), and President & Fellows of Harvard College v. PECO Energy Co., 57 Mass.App.Ct. 888, 896, 787 N.E.2d 595 (2003)).

         Although the relevant policy language is somewhat difficult to parse, that does not mean that it is ambiguous. Massachusetts Prop. Ins. Underwriting Ass'n v. Wynn, 60 Mass.App.Ct. 824, 827, 806 N.E.2d 447 (2004) (" While reading and understanding an insurance policy's provisions as to coverages, exclusions, and exceptions is often a formidable task, difficulty in comprehension does not equate with ambiguity").

         Similarly, the fact that the parties disagree vigorously regarding the proper way to read the insurance policies does not demonstrate that there is a legal ambiguity either. See Boazova, 462 Mass. at 351 (" an ambiguity is not created simply because a controversy exists between the parties, each favoring an interpretation contrary to the other") (quoting Lumbermens Mut. Cas. Co. v. Offices Unlimited, Inc., 419 Mass. 462, 466, 645 N.E.2d 1165 (1995)).

         1.2. The Coverage Limits

         This lawsuit concerns three related insurance policies that provide professional liability coverage to physicians working at and employees of Tufts Medical Center. The primary policy was issued by a captive insurer belonging to Tufts' predecessor. There is also an excess insurance policy that was issued by the same captive insurer. Finally, two reinsurance policies were issued by different syndicates of underwriters assembled by Lloyd's of London.

         The primary insurance policy provided each defendant in the underlying malpractice lawsuit with $2.5 million of coverage. The primary policy states that each " Insured Individual" is covered for professional liability up to $2.5 million for any one " medical incident, " a term that encompasses all of Plaintiffs' claims in the malpractice case.[1] The term " Insured Individual" is defined to include any physician working at and any other person employed by a named insured. It is undisputed that the three ...

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